Did you know that we can also purchase funds at supermarket? On April 24, Fund Online Korea launched an ‘Online Fund Supermarket’ upon approval by the FSC. Fund supermarket is where you can shop different investment products at once just like when you buy groceries. In the past, customers needed to visit banks or asset management firms in order to purchase funds. There were some online investment products but they were only few in number and hard to make comparisons between diverse investment products offered by different banks and assets management firms.
In the past, there was high possibility that investors did not receive sufficient information. This is because banks and asset management firms are likely to recommend investment products which they made or can make profit with. In addition, small and mid-sized management firms found it difficult to sell their funds. Therefore, some said that traditional fund markets can discourage competition. Therefore the FSC approved establishment of Fund Supermarket to boost fund markets and diversify selling channel where banks were the main channel for fund distribution.
Due to its convenience and low commission fee, Fund Supermarket attracted 30 million dollars (31.9 billion won) within 50 days and the amount is continuously increasing for six months.
As of October 17, over 24 thousand people newly opened accounts. The amount of fund investments reached 300 million dollars (345.4 billion won) or 10 thousand dollars (14.2 million won) per person. Funds which were designed by small and mid-sized management firms are showing great performance.
In order to vitalize the fund market in the long-term, it is essential to introduce Independent Financial Advisor (IFA). This is because investors who do not have expert knowledge in finance may have trouble in choosing appropriate investment instruments. IFA is an advisor who is independent from any financial institutions and recommends appropriate financial products for each investor considering their assets and profitability.
They also have IFA in the U.S and U.K. They are called IC(Independent Contractor), IBD(Independent Broker-Dealer), RIA(Registered Investment Advisor) or TPM(Third Party Maketer). They all have different names but their roles are similar in a sense that they receive commission fee after giving advices to investors. They are popular as people want to design investment plan according to personal financial status. Even some IFAs not only recommend financial products but provide different services such as providing on-line lectures and designing investment portfolio. IFA is already common in some developed countries. For example, the amount of financial products which are sold by IFA in U.K accounts for around 55.6%. However, around 65.6% of fund is sold by domestic security companies in Korea.
More various types of funds will be available as asset management companies are planning to introduce new ones. The FSC plans to introduce IFA in fund investment first then expand it throughout the financial products. This will improve customers’ profitability as well as protect customers from selecting inappropriate products.